Ballantyne Trustees Limited v Papprill Hadfield & Aldous Solicitors Nominee Company Limited
[2016] NZHC 2414
•11 October 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000178 [2016] NZHC 2414
UNDER the Companies Act 1993 IN THE MATTER
of GOOSE BAY RANCH HOLDINGS LIMITED (IN LIQUIDATION)
BETWEEN
BALLANTYNE TRUSTEES LIMITED AND OTHERS
Applicants
AND
PAPPRILL HADFIELD & ALDOUS SOLICITORS NOMINEE COMPANY LIMITED
First Respondent
AND
D D CRICHTON AND ANOTHER Second Respondents
Hearing: 14 September 2016
Additional written submissions: 19 September 2016;
22 September 2016
Appearances:
M J Tingey for Applicants
A B Darroch for First RespondentM E Parker and J E Eckford for Second Respondents (latter in written submissions only)
Judgment:
11 October 2016
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on application for variation or rescission
Introduction
[1] The applicants unsuccessfully applied to this Court for leave to pursue a derivative action under s 165 Companies Act 1993 and (in the alternative) an order under s 284 Companies Act 1993 giving directions to the former liquidators of
Goose Bay Ranch Holdings Ltd (in liq) (GBRH) to bring proceedings in the name of
BALLANTYNE TRUSTEES LIMITED AND OTHERS v PAPPRILL HADFIELD & ALDOUS SOLICITORS NOMINEE COMPANY LIMITED [2016] NZHC 2414 [11 October 2016]
GBRH. Their intended defendant is the first respondent, Papprill Hadfield & Aldous Solicitors Nominee Company Ltd. The former liquidators are the second respondents. The two applications were dismissed in my judgment dated 22
September 2015 (the judgment).1 The applicants now seek rescission or variation of
my orders on the basis of further evidence which was not originally before the Court.
[2] When a party seeks to overturn a High Court interlocutory order by an appeal based on fresh evidence, the general rule is that the evidence will not be admitted on the appeal unless it could not have been obtained for use in the High Court (the freshness rule).
[3] In this case, the applicants chose not to appeal the interlocutory judgment precisely because they could not meet the requirements of the freshness rule. They elected instead to apply (under r 7.49 High Court Rules) for variation or rescission of the interlocutory orders.
[4] The key questions are whether and, if so, to what extent the freshness rule applies to r 7.49 applications.
The repair to the original application
[5] Central to the judgment was my conclusion that a prudent business person in the conduct of his or her own affairs would not have commenced the claims proposed by the applicants.2 The applicants had not called expert evidence in relation to the valuation and marketing issues which would be involved in any trial. I found that it would be irresponsible for a business person in the conduct of his or her own affairs to bring a claim without supporting expert opinion or evidence.3 I examined other difficulties in relation to the applicants’ allegations of breach on the part of the respondents but the conclusions on those were not central to the outcome.
[6] For the applicants, Mr Tingey has based his submissions primarily on the availability of expert evidence (four detailed affidavits by new deponents) to fill the
1 Ballantyne Trustees Limited v Papprill Hadfield & Aldous Solicitors Nominee Company Limited
[2015] NZHC 2294.
2 At [79].
3 At [42].
gap which was identified in the judgment. In this regard, the grounds of the application for rescission or variation of the orders in the judgment were stated by the applicants as follows:
(a) the applicants, acting in reliance on advice of their former legal counsel, were denied the opportunity to prepare and present expert evidence, resulting in:
(i)the factual and legal issues before the Court not being fully argued; and
(ii)the decision of the Court accordingly being wrong, as the absence of such evidence was considered determinative of the application;
(b) expert evidence on behalf of the applicants is obtainable which would
justify a reconsideration of the Court’s decision.
[7] Both sets of respondents oppose the application. The grounds of opposition to what I have described as the primary argument may be summarised in the assertion that it is not open to the applicants, following the 2015 hearing, to challenge the judgment as “wrong” through reliance on evidence which could have been called at the time of the original application.
The freshness rule
[8] The freshness rule was established in relation to rights of appeal through the hierarchy of courts. The appellate court may grant leave for the admission of further evidence.4
[9] The authorities relating to fresh evidence on appeal were reviewed by the
Court of Appeal in Erceg v Balenia Ltd.5 Baragwanath J delivering the judgment of the Court, stated:6
4 For District Court appeals: High Court Rules, r 20.16(1); for High Court appeals: Court of Appeal (Civil) Rules 2005, r 45(1); for Supreme Court appeals: Supreme Court Rules 2004, r 40(1).
The Supreme Court has confirmed that the well understood and firmly established principles developed under previous rules remain … Those requirements are that the evidence be fresh, credible and cogent. It will not be regarded as fresh if it could, with reasonable diligence, have been produced at the trial … Particular weight will be accorded in summary judgment proceedings to the need for finality: it is only in exceptional circumstances that the Court will permit further evidence to be filed on appeal …
(citations omitted).
[10] In Erceg v Balenia Ltd, the Court of Appeal refused the appellant leave to file further evidence because there had been an election not to file such evidence at first instance apparently “because the defence considered that Balenia had failed to make out its case”.7
[11] The same outcome occurred on a subsequent appeal by Mr Erceg the following year.8 Chambers J, delivering the judgment of the Court, observed of the failure to call evidence at first instance “[h]aving made such a tactical decision, Mr Erceg could not later change his mind and decide to file further affidavits after all”.9
His Honour continued:10
Obviously, a tactical decision was then made not to file [an affidavit that was being worked on]. Mr Erceg must live with his election. In no way could he now satisfy the well-known test for the admission of fresh evidence on an appeal.
[12] There is a strictness to the freshness rule which was identified by the Court of
Appeal in Rae v International Insurance Brokers (Nelson Marlborough) Ltd.11
Tipping J, delivering the judgment of the majority, observed as to the principles underpinning the further evidence rules:12
5 Erceg v Balenia Ltd [2008] NZCA 535.
6 At [15].
7 At [5].
8 See Erceg v Balenia Ltd [2009] NZCA 48, [2009] NZCCLR 32.
9 At [36].
10 At [37].
11 Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA).
12 At 192. The public interest aspect identified in Rae’s case is reinforced and developed in the judgments of the High Court of Australia in Aon Risk Services Australia Ltd v Australian
National University [2009] HCA 27, (2009) 258 ALR 14, where it was recognised that a Court’s duty is not simply to have regard to the interests of the parties directly affected but also to the allocation of judicial resources amongst all litigants. In Aon Risk Services itself, the High Court found, in relation to an application for adjournment of trial, that the impact on other users of the Court should have led to the refusal of adjournment.
The principles upon which further evidence is admitted are designed to balance the interests of the person seeking to adduce such evidence on the one hand with the interests of the opposite parties on the other. They are designed to reflect the public interest in ensuring, so far as is possible, that parties put up their best case at trial. Any other approach would be very wasteful of public resources.
His Honour added, as to the strictness of the freshness rule:13
While the absence of freshness is not an absolute disqualification, the criteria for admission in such circumstances must be very strict. In our view, when the evidence is not fresh it should not be admitted unless the circumstances are exceptional and the grounds compelling. In addition, it will need to pass the tests of credibility and cogency.
[13] The freshness rule applies to appeals from High Court decisions in relation to leave to pursue a derivative action under s 165 Companies Act as to any other appeals. Birnie v Peters is an example of such an appeal.14 The Court of Appeal declined an application to admit further evidence by applying the freshness rule as enunciated in Erceg v Balenia Ltd.15 The same approach must apply in relation to appeals from High Court decisions in relation to decisions under s 284 Companies Act concerning directions to liquidators.
The applicants’ r 7.49 application
[14] As I have noted, the applicants in this case elected not to pursue an appeal because, in relation to their new evidence, they could not meet the requirements of the freshness rule. Hence the bringing of their application under r 7.49 High Court Rules.
[15] For the applicants, Mr Tingey submitted that there were two alternative ways for the Court to deal with the present application. First, Mr Tingey submits that the applicants may as of right rely upon the new evidence to establish that the interlocutory orders were wrong. In other words, the Court would have no discretion
as to whether to admit or reject the new evidence.
13 At 193.
14 See Birnie v Peters [2010] NZCA 433.
15 Erceg v Balenia Ltd, above n 5.
[16] Alternatively, and in the event I determine that a discretion exists as to admitting new evidence so that there is effectively a leave requirement, Mr Tingey submits that the consideration of leave is not affected by the freshness rule as it applies to appeals. He submits that the availability of new evidence constitutes a change of circumstances which of itself calls for the admission of the evidence. He submits that in these circumstances relevant evidence was “overlooked” at the original hearing. Alternatively, the availability of new evidence constitutes a “special circumstance” requiring its admission.
Rule 7.49 applications
The High Court Rules
[17] Rule 7.49 High Court Rules provides:
7.49 Order may be varied or rescinded if shown to be wrong
(1) A party affected by an interlocutory order (whether made on a Judge’s own initiative or on an interlocutory application) or by a decision given on an interlocutory application may, instead of appealing against the order or decision, apply to the court to vary or rescind the order or decision, if that party considers that the order or decision is wrong.
…
(6) The Judge may,—
(a) if satisfied that the order or decision is wrong, vary or rescind the order or decision; or
(b) on the Judge’s own initiative or on the application of a party,
transfer the application to the Court of Appeal.
[18] Rule 7.49(2) excludes certain categories of interlocutory order from the operation of r 7.49(1).16 None of the exclusions apply to the interlocutory orders in
this case.
16 The most significant exclusion in the context of this case is under r 7.49(2)(b), whereby orders of summary judgment obtained under r 12.4 High Court Rules cannot be varied or rescinded – the only avenue of challenge is through appeal.
[19] Before turning to the authorities on the application of r 7.49, I observe that the primary purpose of the rule (and the cognate English rule) has been long and consistently recognised. It is derived from r 421 of the Code of Civil Procedure.
The authorities
[20] In Jollands, Ltd v Whitley, on a motion for review of an order of security for costs, Fair J (delivering the judgment of a Full Court of the Supreme Court) described the purpose of r 421:17
The primary purpose of this rule is to enable the Court to review applications heard in Chambers which, owing to oversight, belief that the order will certainly be made in the form applied for, failure to appreciate the importance of the question involved, or similar reasons, are not fully argued in Chambers. The rule is intended to give an opportunity for reconsideration upon a fuller argument.
[21] In Graebar Holdings Ltd v Taylor, the Court of Appeal considered r 264 High Court Rules, which had followed on from r 421 of the Code.18 In Graebar the Court of Appeal adopted the passage from Jollands, Ltd v Whitley cited in the previous paragraph. Bisson J (delivering the judgment of the Court) explained:19
Rule 264 is intended to provide an alternative to an appeal to this Court so that interlocutory matters may be dealt with expeditiously and less expensively in the High Court. The rule is particularly appropriate where some additional point not raised before has emerged or there are facts, whether or not arising from a change of circumstances, which were not previously before the Court and should be considered. We see no reason why an application made within the seven day periods prescribed in the rule should not be supported by an affidavit with further evidence if it will enable the Court to do justice in an interlocutory step and facilitate progress towards the substantive hearing.
[22] The final sentence in that quotation from Graebar appears to indicate that an applicant under r 7.49 may, as of right, submit with its application affidavit evidence of relevant circumstances. That still leaves the question as to whether the freshness
rule should apply to the assessment of such evidence.
17 Jollands, Ltd v Whitley [1949] NZLR 290 (SC) at 292.
18 Graebar Holdings Ltd v Taylor [1989] 2 NZLR 10 (CA). Rule 264 was itself subsequently replaced by r 259 and now by r 7.49 High Court Rules.
19 At 16. The first two sentences were adopted by the Court of Appeal recently in Crequer v Chief
Executive of the Ministry of Social Development [2014] NZCA 284 at [18] – [19].
[23] For the first respondent, Mr Darroch referred me to Arkley v Fraser Mill Properties Ltd.20 In that case Barker J refused to exercise the (then r 264) jurisdiction to vary or rescind an order made by way of summary judgment against a defendant. Having set out relevant passages from the judgment in Graebar, His Honour noted:21
The classic occasion encountered for an application to review occurs when a Judge has made an order in Chambers, following little if any argument and where judgment has been given in a fairly summary way. It is by no means unusual for an aggrieved party to move under r 264 to have the whole matter argued at length in open Court.
Turning to the circumstances in the case before him, Barker J then continued:22
… there is no suggestion of fresh evidence or different circumstances. I think that this Court should be very reluctant, in effect, to sit on appeal from another Judge or indeed a Master in those areas where the Master has jurisdiction to hear cases in open Court.
This particular case involved extensive affidavit evidence, including five affidavits in opposition. There was a half-day argument before the Master who then reserved his decision. It seems to me quite inappropriate that the Court should be asked to relitigate the cause in the absence of any special circumstances, such as the discovery of fresh evidence.
[24] In Re Profcom Systems Ltd, Tompkins J referred to both Graebar and Arkley.23 His Honour referred, with implicit approval, to the approach of Barker J in Arkley indicating that:24
… in the absence of fresh evidence or different circumstances, the Court should be very reluctant in effect, to sit on appeal from another Judge or indeed a Master, in those areas where the Master has jurisdiction to hear cases in open Court.
[25] His Honour then identified matters relevant to the exercise of the review jurisdiction:25
20 Arkley v Fraser Mill Properties Ltd [1989] 2 NZLR 57 (HC).
21 At 60. The availability of review or rescission in relation to an interlocutory application for summary judgment has since been removed: see now rule 7.49(2)(b) High Court Rules.
22 At 61.
23 Re Profcom Systems Ltd [1989] 2 NZLR 63 (HC).
24 At 67.
25 At 68.
There are a number of matters that may be relevant to the exercise of the Court’s discretion whether to vary or rescind an order under the rule. They would include matters such as whether the order was made in Court or in Chambers, the amount involved, whether there were significant legal or jurisdictional issues, the nature of the hearing that resulted in the order sought to be varied or rescinded, and, in particular, whether the issues were fully argued and whether there is placed before the Court on the application under the rule, further evidence or other matters that would justify a reconsideration of the order already made.
[26] A further decision identified by Mr Darroch in this context was Kiwi Co- operative Dairies Ltd v Capital Dairy Products Ltd.26 In that case, Greig J cited the same passages from Graebar as those cited by Barker J in Arkley. His Honour then continued:27
There will always be cases where a review is the more appropriate and expeditious course to follow. For example, in the case of an ex parte judgment it may well be that a review is an essential step before an appeal is taken as that is in effect a provisional order made on evidence and submissions from one side only: see WEA Records Ltd v Visions Channel 4
Ltd [1983] 2 All ER 589 at 593. Similarly where there are changes in circumstances or new and emerging facts or law a review may be the most
appropriate course.
It is in principle wrong that a litigant should have second opportunity merely to re-argue or to reinforce his case with evidence which was already available but which was not called. There is a reluctance on the part of any Judge and some difficulty indeed for a Judge to rehear and reconsider his own decision particularly where that has been subject to an extended argument, with evidence, and an occasion to consider his decision even if that may be for a short period. There is a reluctance on a Judge of coordinate jurisdiction to review the decision on the facts or even the law of another Judge. There is the possibility that if the right of review was free and open- ended there could be a repeated application for reconsideration and review of any interlocutory application before all the Judges that might be available.
…
In this case the Court is invited to reconsider its decision on a question of balance of convenience. To support that some additional information and evidence is given, none of it was unavailable or can be treated as new in the proper sense. The outline of the evidence or the subject of the balance of convenience was canvassed before the Court at the earlier hearing. There are no new or emergent facts and in the end this is a case where there can be no justification for a review or reconsideration of the matter.
26 Kiwi Co-operative Dairies Ltd v Capital Dairy Products Ltd (1989) 1 PRNZ 622 (HC).
[27] The approach of the Court of Appeal in Graebar binds this Court and I follow it. While the judgments in Arkley and Kiwi Co-operative Dairies Ltd, applying the Graebar approach in relation to fresh evidence, do not strictly bind me, I view them as principled and correct approaches in relation to fresh evidence.
Special circumstances
[28] As the judgment of Barker J in Arkley indicates, the discovery of fresh evidence is a special circumstance which may justify the variation or rescission of an order under rule 7.49.28 But, as the judgment also indicates, there may be other circumstances (other than fresh evidence) which justify review. The Court of Appeal’s judgment in Graebar, as cited at [21] above, recognises that there may be facts “whether or not arising from a change of circumstances” which were not previously before the Court and should be considered. The Court of Appeal in Erceg v Balenia Ltd required the circumstances relied on to be “exceptional”.29
[29] For the applicants, Mr Tingey sought to persuade me that the applicants’ new evidence fitted precisely within the “circumstances” which were not previously before the Court (whether involving a change or otherwise) referred to in Graebar.
[30] I do not read the Court’s judgment in Graebar as suggesting that the production (on a r 7.49 application) of evidence which a party could have called at first instance is a circumstance of the nature referred to by the Court of Appeal. Rather, the Court through its reference in Graebar to Jollands, Ltd v Whitley, was referring to circumstances which are relevant to the interlocutory application which may have been better or more specifically argued if there had been the time, on fuller argument, for counsel and the Court to grapple with the facts or the issues.
[31] In Graebar itself (where the interlocutory order related to split trials), the Court of Appeal identified the “material change in situation” as having arisen through the second defendant’s subsequent identification of further grounds of his claim in the statement of claim. That was directly relevant to the appropriateness of
the interlocutory order for separate trials. In the terminology used by the Court of
28 Arkley v Fraser Mill Properties Ltd, above n 20.
Appeal it may be seen as a “changed circumstance”. Graebar establishes that whether or not it involved a “change” of circumstance, the High Court would have been entitled to view it as a special circumstance on which to complete a review.
[32] Other situations of exceptional circumstances (whether changed or otherwise) which may justify the variation or rescission of an interlocutory order made on less than full hearing or full evidence may be expected to arise in relation to matters such as discovery and security for costs where appreciation of the relevant documents may alter on fuller analysis or understanding of a party’s financial position or the likely costs of the litigation may evolve within a short period.
[33] The special circumstance in this case, from the applicants’ point of view is that the applicants’ failure to file the relevant evidence was occasioned by counsel’s advice that such evidence was not required.30
[34] In Ranby v Hooker, the Court of Appeal heard an appeal in a wills case.31
The parties called many witnesses and some were cross-examined. Following the lengthy trial, the High Court had determined that the deceased had lacked testamentary capacity when executing two final documents. The Court pronounced in favour of an earlier will.
[35] On appeal, the appellants wished to produce additional evidence. They relied upon the fact that the lawyer (Mr J P Doogue) who had acted until close to trial had advised against filing further evidence and that, upon the late appointment of their lawyer to the Bench, the new lawyer had had a relatively short time to digest matters before the designated trial date.
[36] The Court of Appeal found that the appellants had not satisfied the first criterion for the admission of fresh evidence (as the evidence could, with reasonable
30 There is a suggestion in one of the letters from counsel for the first instance hearing that there was also not time to file further evidence – it appears clear, however, on a full reading of the contemporary documents that the fundamental advice related to the lack of need for such evidence.
31 Ranby v Hooker CA 172/96, 20 March 1997.
diligence, have been obtained for use at the trial). Barker J, delivering the judgment of the Court, observed:32
While inclining to the view that Mr Doogue’s advice was very sound, we do not need to make a definite finding on that point. However, we note there was a definite tactical decision made by counsel not to seek further affidavits from “persons who knew the deceased”. In our view, the appellants must live with that decision and the application to adduce further evidence from further lay witnesses about the deceased’s demeanour must fail in limine.
[37] This passage in Ranby was applied by Fogarty J in Oceanside Developments Ltd v Cutler on an appeal from the District Court.33 The appellants sought leave to call five witnesses who had not been called at trial. Fogarty J explained in that regard:34
… essentially the appeal to this Court for sympathy is that Mr Nolan did not have a good chance to present his case because of decisions made by his counsel … in not calling evidence or even the failure … to obtain, for example, valuation evidence.
[38] His Honour referred to the passage from Ranby v Hooker set out at [36]
above. He continued:
[18] I have a clear view that arguments based on mismanaged decisions prior to trial as to witnesses to be called are not special reasons that can be the basis of granting leave to admit evidence. To do so would be to wholly undermine the core policy underpinning r 20.16 illustrated by the decision in Ladd v Marshall, a policy which I note also applies to the admission of further evidence in the Court of Appeal and which can also be found in the decision of Ranby.
…
[20] Our system of civil litigation in our common law jurisdiction is a practical one. It is not a perfect one. It proceeds on the basis that the parties will be given a fair opportunity to prepare for trial. They will each make decisions as to the selection of evidence and they have to live with the consequences of those decisions and the degree of time and energy that they put into the preparation of the trial. A subsequent realisation after a judgment that the trial preparation could have been more thorough or other witnesses should have been called are not the basis for an appeal for special reasons for leave to adduce further evidence.
32 At 8.
33 Oceanside Developments Ltd v Cutler HC Christchurch CIV-2009-409-835, 21 August 2009.
34 At [14].
[39] In RMM v LDO, Mackenzie J took a similar approach on an appeal against a decision of the Family Court in reaching a conclusion that the appellant’s further evidence did not satisfy any of the tests of freshness, cogency or credibility.35 His Honour observed:36
An application to adduce further evidence on appeal does not provide a means to revisit tactical decisions as to how the case was conducted at first instance. Whatever the reason for their decisions may have been, they do not provide an opportunity to adduce further evidence which does not meet the tests.
Supplementary submissions of counsel for plaintiffs
[40] In submissions at the hearing, Mr Tingey did not address me in any detail by reference to authorities in relation to the admission of fresh evidence. I therefore, when reserving my judgment, directed the filing of supplementary submissions on the point.
[41] Mr Tingey has not referred me to New Zealand case law. He has, however, identified a passage in McGechan on Procedure where it is stated, “[i]t is now well established that fresh evidence from parties previously heard, whether or not it was previously available, should be admitted”.37
[42] As Mr Tingey notes, the authors of McGechan refer for that proposition to three authorities, namely Graebar, Arkley and Re Profcom Systems. For the reasons I have developed above at [20] – [39], I do not regard that line of cases, taken together, to be authority for the proposition stated in McGechan that fresh evidence should be admitted, “whether or not it was previously available”. Furthermore, the authors of the McGechan commentary, having referred to the three decisions in
question, add the important qualification:38
But note Greig J’s caution in Kiwi Co-operative Dairies Ltd v Capital Dairy Products Ltd … about allowing a party to have a “second opportunity nearly to re-argue or to reinforce his case with evidence which was already available but which was not called”.
35 RMM v LDO HC Hamilton CIV-2007-419-1093, 11 October 2007.
36 At [9].
37 A C Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at
[HR7.49.06].
38 At [HR7.49.06].
[43] When the authorities are reviewed, it is clear that the “caution” which McGechan suggests was expressed by Greig J in Kiwi Co-operative Dairies Ltd v Capital Dairy Products Ltd can properly be stated not so much as caution against a more liberal approach but as recognition that generally a narrower approach is warranted. The New Zealand cases firmly establish a narrower approach against the background to the review rule as recognised by the Court of Appeal in Graebar (“an alternative to appeal so that interlocutory matters may be dealt with expeditiously
and less expensively in the High Court”).39
[44] The approach applied in the New Zealand case law is more aptly presented in the commentary in Sim’s Court Practice where it is stated, after quotation of the passage I have cited from Graebar, that “[i]t is unlikely that the High Court will vary or rescind an order made following a hearing inter parties with full argument”.40
[45] The commentary might have added that the most recognised event which may lead to a successful review arises when there is new matter which meets the freshness rule.
[46] Mr Tingey submitted that interlocutory judgments should nevertheless be treated differently to judgments upon trial because the latter relate to “final decisions of the Court”, in relation to which the principles of res judicata apply.
[47] The distinction is a matter which may be considered in the ultimate exercise of the discretion but the rationale on which the New Zealand Courts have placed emphasis on the freshness rule does not attach great significance to the concepts of res judicata or issue estoppel. Rather, the case law has settled upon the basis recognised in cases such as Arkley and Kiwi Co-operative Dairies Ltd – the freshness rule will be firmly applied in cases where the parties had every opportunity to fully present and argue cases at the first hearing.
[48] Mr Tingey referred me to three authorities from other common law jurisdictions. They are:
39 Above at [21].
40 Jessica Alexander (ed) Sim’s Court Practice (online looseleaf ed, LexisNexis) at [HCR7.49.5].
The authors then refer to six cases including Re Profcom Systems, above n 23.
(a) Woodhouse v Consignia plc – a decision of the Court of Appeal of
England and Wales;41
(b) Nominal Defendant v Manning – a decision of the New South Wales
Court of Appeal;42
(c) Bajramovic v Caluaquib – a further decision of the New South Wales
Court of Appeal.43
[49] In each of the relevant jurisdictions the procedural rules provide, in parallel with the New Zealand rules, for review of interlocutory judgments.
[50] As Mr Tingey submitted, the three overseas decisions recognise that in such reviews, including in relation to the admission of further evidence, the ultimate issue is the justice of granting the application as against the injustice of refusing it. There is recognition that the way in which a party’s counsel conducts a trial on behalf of the party will normally bind the party in the sense that there will be no reopening of the issues. But the Courts in the three cases found that there should not be such a stringent approach in the case of interlocutory hearings which involve no
determination on the full merits.44
[51] In each case, the Court dealt with or referred to situations involving incompetence or negligence in the presentation of the application when first argued. In each of the New South Wales cases, the Court considered the relevance of the fact that a party’s case had failed through negligent presentation by counsel rather than through the party’s fault. The decisions refer to the ability of the Court, if considering the fresh evidence or material and granting the review, to adjust matters as between the parties by making costs orders (in relation to the first hearing).
[52] Mr Tingey did not identify any New Zealand decision adopting or following the three overseas decisions.
41 Woodhouse v Consignia plc [2002] EWCA Civ 275, [2002] 1 WLR 2558.
42 Nominal Defendant v Manning [2000] NSWCA 80, (2000) 50 NSWLR 139.
43 Bajramovic v Caluaquib [2015] NSWCA 139, (2015) 71 MVR 15.
44 See, for instance, Bajramovic v Caluaquib, above n 43, at [39].
[53] I am prepared for the purposes of the present case to assume (without deciding) that the following approach (which I take from the cases cited by Mr Tingey) can be applied equally in New Zealand in relation to an application for variation or rescission of interlocutory orders under r 7.49:
(a) the jurisdiction to consider evidence which is not fresh or to entertain re-argument on a matter not adequately argued at the first hearing will be exercised very sparingly when there was a full opportunity for evidence and argument at the first hearing;
(b)the ultimate test in relation to the admission of further evidence or re- argument turns on the justice of the case and the avoidance of a miscarriage of justice;
(c) one situation which, on the particular facts of a case, may justify the exercise of the review jurisdiction is where the party’s case was, without the fault of the party itself, poorly presented by the party’s counsel.
The circumstances of this case
The features of the first hearing
[54] The conduct for which the applicants would pursue the respondents occurred in early-2010. The second respondents had long since completed their liquidation of GBRH.
[55] The applicants first filed their court documents in April 2014 in relation to those events. There was then a significant delay while then-counsel for the applicants addressed shortcomings in the adopted procedure. Timetables were made and later revisited for the filing of evidence through to mid-2015. Extensive evidence was filed by the parties (affidavits being filed between April 2015 and September 2015). The hearing (initially scheduled for 28 May 2015) was adjourned to 8 September 2015, with two days reserved, by reason of the extent of evidence already filed and the need for further evidence. Thereby the parties received more
than three months’ notice of the hearing date. The hearing took place as scheduled on 8 September 2015. The Court was able to give its reserved judgment (104 paragraphs) some two weeks later.
[56] It is difficult to imagine the parties to an interlocutory application being afforded more time to prepare for hearing or any greater opportunity to be heard. It is also difficult to envisage a much older subject-matter for potential leave than the five-and-a-half year old events of 2010 (measured at the time of the leave hearing in September 2015).
The nature of the applicants’ proceeding
[57] The two sets of orders sought by the applicants (under ss 165 and 284
Companies Act) were for the right to pursue proceedings for the benefit of GBRH but indirectly for the applicants’ personal benefit. Given the period which had passed since the liquidation of GBRH (on 27 November 2009) and since the impugned mortgagee sale (February 2010) the applicants and counsel must be taken to have appreciated that the hearing of applications for orders under the Companies Act represented the single opportunity to begin a process of suing these respondents.
[58] The procedure involved may correctly be described as an interlocutory procedure but it is unlike more common interlocutory matters such as discovery, security for costs and pre-trial directions. It bears more similarity to an interlocutory application such as for summary judgment. In that regard, the Court of Appeal observed in Lawrence v Bank of New Zealand:45
Particular weight must be accorded to the need for finality in litigation in this context in summary judgment proceedings, whose purpose it is to permit unmeritorious claims and defences to be brought justly and efficiently to a swift end.
[59] Similarly, in relation to such matters as leave or directions under ss 165 and
284 Companies Act, it is important that applicants know once and for all whether a claim is to be pursued and that the potential defendants equally know once and for
all whether they are to be exposed to litigation. The applicants in such cases have an
45 Lawrence v Bank of New Zealand (2001) 16 PRNZ 207 (CA) at [18].
opportunity to “fire their best shot” and should not be heard, against a background of full opportunity for preparation and hearing, in an attempt to reload the chamber and fire again.
Consistency between the appeal and review processes
[60] In Birnie v Peters, there was an appeal against a High Court judgment granting leave to the respondents to bring a derivative action on behalf of a company against the appellants.46 In the High Court, Asher J applied (as I was invited to do in
this case) the test in Vrij v Boyle.47 Whereas I found in my judgment that a prudent
business person in conduct of his or her own affairs would not have brought the claim proposed by the applicants, Asher J in Peters v Birnie found that the Vrij v Boyle test was satisfied.
[61] The appellants in Birnie v Peters sought leave to adduce further evidence. Counsel for the appellants accepted that the evidence was not fresh because it had been available at the time of the High Court hearing. The submission was that it should nonetheless be admitted on appeal because of its importance to the case.48
The Court of Appeal applied the freshness rule as previously enunciated in Erceg v
Balenia Ltd. The evidence was not admitted.
[62] In this case the interlocutory judgment followed full preparation of the parties’ cases and a full hearing. It would produce an anomaly were a different approach to be applied in relation to applications such as the present application under the Companies Act, dependent upon whether the aggrieved party chose appeal or review as their means of upsetting the first instance decision. It is therefore not surprising that on the authorities as I have reviewed them, the freshness rule is applied in a relatively strict way to reviews under r 7.49 High Court Rules when the
interlocutory application in question was fully prepared and heard.
46 Birnie v Peters, above n 14; Peters v Birnie [2010] NZAR 494 (HC).
47 Vrij v Boyle [1995] 3 NZLR 763 (HC).
48 Birnie v Peters, above n 14 at [13].
Application of the correct approach in this case
[63] I bring together my conclusions on the r 7.49 jurisdiction as they affect new evidence:
(a) Applicants are entitled (without leave) to adduce the evidence they rely on in support of their application.
(b)Where the decision at first instance followed a full hearing and an opportunity for full preparation then:
(i)the evidence must nevertheless, if the Court is to take it into account as fresh evidence, satisfy the same tests as are applied in relation to fresh evidence on appeals;
(ii)it is not of itself sufficient to justify review nor an exception to the fresh evidence rule that a party (whether with the correct or incorrect advice of counsel) elected (whether for tactical or other reasons) not to call available evidence – that is but one matter to be weighed.
[64] Once the principles are stated as above, it is clear that the Court in this case should not depart from the freshness rule. The affidavits go to the central issues of valuation and marketing which fell to be considered on the original application. There is no suggestion that the particular experts or others of similar expertise were not available to provide affidavits at the time of the original hearing. Their proffered evidence does not meet the requirements of the first limb of the freshness rule as to the evidence not being reasonably discoverable or obtainable for the original hearing. Against the background of very old events which would become the subject of litigation and trial at some point in the future, and the opportunity the applicants had to fully present their best case, the respondents cannot be justly put through the full assessment of new evidence and exposure to a grant of leave. The awarding of costs against the applicants might go some way to addressing the injustice, but the ability to move on with the exposure to litigation in relation to
events which have become even more aged than in September 2015 will have been lost.
[65] In relation to the freshness rule, I do not therefore go on to consider the cogency of the proffered evidence. I note that Mr Darroch developed submissions as to a lack of cogency which would have required consideration had I not reached my previous conclusion.
[66] Beyond the narrative evidence of the four experts now proffered, the applicants also produced two sets of historical documents. Those documents have a close relationship to a Simes & Co valuation which the applicant produced at the first hearing. The first are identified as attachments to the produced Simes & Co valuation which had apparently been produced in an incomplete form. The second is a separate Simes & Co valuation prepared around the same time but for a different figure. The evidence of the applicants in relation to these documents does not meet the freshness rule: the applicants have not adequately explained why the documents were not reasonably discoverable at the time of the initial hearing. The Court will accordingly not consider them on that basis alone.
[67] Mr Tingey did not develop submissions in relation to the importance or significance of these two sets of additional documents. It may well be that they would fail to meet the other two aspects of the freshness rule but it is unnecessary that I determine that.
The s 284 Companies Act application
[68] The above conclusions apply to both Companies Act applications. Both the application for leave under s 165 of the Companies Act and for directions under s
284 of the Companies Act failed through an absence of expert evidence on the central issues of valuation and marketing.
[69] For the former liquidators of GBRH, Mr Parker submitted that the present application should be dismissed for a further reason which lies in separate proceedings subsequently issued by the applicants against one of the liquidators and her company. In that proceeding the applicants (as plaintiffs) sue Ms Horne for the
damages they have allegedly sustained through negligent conduct of the liquidation of GBRH. The second respondents have filed evidence and developed argument as to the lack of utility that would flow from any order in this proceeding requiring the liquidators to pursue claims that are being otherwise pursued.
[70] Mr Parker noted that the applicants have responded by asserting that there is a technical reason why the liquidators need to be joined in such a proceeding. Mr Parker submitted with some justification that the “technical reason” has never been satisfactorily explained.
[71] Given my earlier findings, I do not need to determine the application on this basis. I explore the argument no further.
Outcome
[72] The application for rescission or variation must fail. The interlocutory hearing at which the applicants initially failed does not, on its facts, fall within the compass of cases which r 7.49 is intended to address.
Costs
[73] I will reserve costs. Costs must inevitably follow the event. I will receive written submissions should counsel be unable to agree on the amount of costs and disbursements. In the event submissions are to be filed, memoranda are not to exceed four pages, the respondents filing and serving first and the applicants within five working days thereafter.
Orders
[74] I order:
(a) the application dated 29 September 2015 is dismissed;
(b) costs and disbursements are reserved.
Associate Judge Osborne
Solicitors:
Bell Gully, Auckland Darroch Forrest, Wellington Parker Cowan, Queenstown
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